Growth Capital & Operating Cash Flow - CFO Survey Results

How to finance companies’ growth? This age-old question is especially relevant here in the San Francisco Bay Area for small and medium-sized companies as well as startups. Growth requires investment (capital) in potentially many different areas like staffing, technology, capital equipment, sales, marketing, etc.

The commercial lender CIT conducted a survey of CFOs (as reported by CFO Magazine) and other finance executives to learn more about how they intend to finance the growth plans at their companies. Overall, while businesses have potential growth opportunities, there appears to be shortage in the capital available to invest in growth.

Here are some key highlights from the survey:

  • 77% of CFOs and other executives said that their companies needed to invest more for growth

  • 69% said that they need to improve profitability by cutting costs

  • 45% said that they were only planning on “moderate” growth

  • About two-thirds said Operating Cash Flow will be one of the most important sources of capital for investing in growth

  • Almost 40% said that cash reserves will also be an important source of growth capital

  • Debt financing (from banks and other sources) will also be an important source of capital to finance growth

  • “While 57% of CFOs and other executives reported that their companies’ sales are higher than they were a year ago, nearly 45% said either that revenues have stagnated (24%) or that they are doing worse than a year ago (20%).

The last survey result perhaps reveals while there is still strong caution by CFOs, CEOs, and business owners towards investing aggressively for growth. Without the confidence of accelerating sales growth, the strategic priority continues to be focusing on improving profit margins by cutting costs and expenses. The ability to finance growth then is dependent on the ability to increase Operating Cash Flow.

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#cashflow #costs

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